The Department of Education (ED) took a “historic” step of winding down its operations by shifting student lending to the Department of the Treasury.
The move is part of the ED’s efforts to adhere to President Donald Trump’s executive order calling for department’s dismantling. Officially ending the department would take an act of Congress, as it was Congress that created it 45 years ago under President Jimmy Carter, but the agency has been looking for ways to decentralize its power and slash its workforce while waiting on GOP lawmakers to deliver on Trump’s campaign promise.
ED announced on Thursday that it has entered into an interagency agreement (IAA) with Treasury for it to assume operational responsibility for collecting on defaulted federal student loan debt and to provide operation support to ED’s work in returning borrowers to repayment. ED said Treasury will eventually work to provide operation support over non-defaulted federal student loan debt and other support for Federal Student Aid’s (FSA) other functions.
“The Federal Student Assistance Partnership marks an intentional and historic step toward breaking up the Federal education bureaucracy and dramatically improving the administration of Federal student aid programs that millions of American students, families, and borrowers rely on to access higher education,” U.S. Secretary of Education Linda McMahon said in a statement.
ED noted that its student loan portfolio stands at nearly $1.7 trillion with fewer than 40 percent of borrowers in repayment and almost 25 percent of borrowers in default. The department said student loan debt is “roughly twice the size of all American university endowments combined and is larger than either our nation’s cumulative credit card debt or cumulative auto debt,” and that the department was “never intended to operate what would be the fifth-largest commercial bank in the United States, distributing over $100 billion each year in Federal student loans and grants.”
“As the Federal student aid portfolio soars to nearly $1.7 trillion and with nearly a quarter of student loan borrowers in default, Americans know that the Department of Education has failed to effectively manage and deliver these critical programs. By leveraging Treasury’s world-renowned expertise in finance and economic policy, we are confident that American students, borrowers, and taxpayers will finally have functioning programs after decades of mismanagement,” McMahon added.
U.S. Secretary of the Treasury Scott Bessent said in a statement that the $1.7 trillion portfolio has bee “badly mismanaged for years.”
“Treasury has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars,” Bessent said.
The IAA with Treasury is ED’s tenth agreement with other agencies designed to break up the bloated federal education bureaucracy.
In an exclusive interview with Breitbart News in December, McMahon said the IAA’s are “all proof of concept” and will help show stakeholders and lawmakers that the department is not necessary.
“I am keeping Congress apprised through our Office of Legislative Affairs and personal phone calls and meetings, lunches and breakfasts with chairmen of committees, so they have a full understanding of what it is that we are trying to do,” McMahon said at the time.
“I believe everyone wants to make sure that the needs of our students throughout the United States are served. I don’t think anyone can look at the scores that we have seen this year, the NAEP scores that were reported, and [think] that we were not failing our students because we clearly have,” she continued. “We need a hard reset in education in this country. That is the president’s directive, and we are working very hard to implement that [and] working with Congress, because it will ultimately take their vote to make these changes permanent.”
When pressed at the time about the lack of congressional action and the potential for a future Democrat administration to reinstate all of the Biden administration LGBTQ+ and DEI indoctrination insanity she has worked so hard to eradicate, she said, “That’s why it’s just incredibly important to keep [lawmakers] in the loop and keep them informed.”
“The purpose for all of this is to get their comments, what they’re hearing from their constituents, to take their questions, to get their guidance,” she said. “This is not something that we’re doing in a vacuum. I think this is a very interactive process on the part of the Department of Education.”
Undersecretary of Education Nicholas Kent told Fox News on Monday called the IAA with Treasury “the next and largest step toward winding down the Department of Education.” He added that ED has made “historic progress in such a short period of time.”
“In over a year, we have reduced the size of the department by over 40 percent. We have entered into ten interagency agreements. We have done multiple staff details for other agencies where staff who are in the department are literally physically sitting at other agencies,” he said. “We are showing Congress and others that this proof of concept works and that we want to continue to work with Congress to memorialize these changes in legislation and with the ultimate goal of closing down the department and putting ourselves out of a job.”
Katherine Hamilton is a political reporter for Breitbart News. You can follow her on X @thekat_hamilton.
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